Amstuds / Puchalla/Radow Name:______

Amstuds / Puchalla/Radow Name:______

Economic Interpretation of the causes of the American Revolution

Based on the arguments of Louis M. Hacker (1940)

Factor One: Trade Mercantilism put economic pressure on colonies.

An unfavorable balance of trade sucked cash (specie) out of colonies because the colonists bought more than they sold to Britain. Some markets in England were protected (that means the colonists could not export certain goods there). How could the colonists continue to get the cash needed to buy manufactured goods from Britain?

·  The South could speculate (sell) land and trade furs;

·  The North could not trade grain and fish to England because English markets were protected (Parliament forbid imports of these things because they did not want, for example, cheap wheat to undercut English wheat growers and put English farmers out of business), expanding settlement from Northern colonies hurt fur trade (settlers cut down trees), any iron was used in colonies and so none was left to export for cash.

So, the colonists short on specie (cash)

The Sugar Act (officially called the “Revenue Act” of 1764) included high duties (import taxes) on wines from wines islands and added lumber, hides, skins, iron, and potash to the enumerated list (goods that can only be traded with England).

Factor Two: Currency Specie was needed to pay debts and for investment in new businesses.

·  Colonial debts in England had to be paid in specie; credit was difficult to obtain

Colonial Response to Factor one: Colonial merchants looked for other options to obtain needed cash (specie)

·  Northern merchants opened up other markets: Newfoundland (provisions and rum); Spain, Portugal, Italy (fish); Spanish wine islands (barrel staves, food in exchange for wine); triangle trade with Spanish, Dutch, French, and British colonies in the Caribbean (animals, lumber, flour, low-grade fish for slaves; rum-slaves-molasses)

·  Northern shipowners resort to piracy, smuggling (especially after 1733 Molasses Act placed high duties on imported foreign molasses)

1750 Rum imports to MA (rum distilleries 63)

barrels of molasses from British islands 500

barrels of molasses from foreign islands 14,500

This angers English sugar planters in the Caribbean

·  English Caribbean sugar planters had influential lobby/voting block in Parliament

·  English investment in sugar plantations of 60,000,000 pounds = six times investment in 13 colonies

Colonial Response to Factor two:

·  In 1690 some colonies begin to print paper money (short term “bill” or bank notes in anticipation of taxes); some printed bank notes backed by land (these notes were issued by “Land Banks”)

·  Paper money leads to inflation.

1750 exchange rate for sterling silver:paper

11:1 in MA; 26:1 in RI; 7:1 in SC

Britain wants a stable currency and passes laws to limit colonial efforts

·  1720 Land Banks outlawed (Bubble Act)

·  1764 Currency Act outlaws paper money in colonies

·  Note that duties and taxes from the 1764 Sugar Act and the 1765 Stamp Act were payable in specie only.

The result in the colonies: John Dickenson 1765 reported, “Money is becoming so extremely scarce that reputable freeholders find it impossible to pay debts which are trifling in comparison to their estates…the debtors are ruined.”

Economic Interpretation

1.  How might the following acts and the colonial responses be interpreted from an economic standpoint?

a.  Sugar 1764

b.  Stamp 1765

c.  Townsend 1767

d.  Tea 1773

e.  Proclamation of 1763

2.  How might the revolution be traced to economic causes?

3.  How did the leaders win support of the lower classes?

Old Interpretation (Political Causes)

1.  British Empire establishes many colonies.

2.  Colonies flourish under salutary neglect.

3.  Britain must send troops and fight war to protect colonists from French and Indians after colonists expand Westward.

4.  Britain needs revenue to pay for expense of protecting and governing colonies.

5.  Britain enforces mercantilism and taxes colonists.

6.  Liberty-loving colonists, who were used to salutary neglect, rebel at taxes and perceived loss of self-government.